IPR Indemnities -
Software Licence Agreements and Software Development Contracts - Part 3

Intellectual Property Rights Indemnities

In software licence agreements, these indemnities are geared to protect the licensee from primary liability for infringement where their use of the developed software would infringe patent rights or copyright. As innocence is no defence to infringement, a user of the software infringes intellectual property rights simply by using it. It is worthwhile to note however that the innocence may be taken into account in the assessment of damages. These indemnities are becoming more important to licensees as an incidental effect of the popularity in obtaining patent rights. Patented inventions may be combined with other inventions, and although in patent cases infringement may be difficult to prove in the absence of great expense, the existence of patent rights in software is the best form of protection, because there is no defence that the software was independently created. That defence is only available in copyright infringement cases.

In order to claim the benefit of an indemnity, the indemnifier should require that they have conduct of the defence of the infringement defence proceedings and insist on the cooperation and assistance of the indemnified party in defending the claim. This to some extent allows the indemnifier to control their costs and run the defence in their best interests. The software supplier is in the best position to run the defence in any event due to their knowledge of the development of the software and the sources drawn on in developing it.

Usually accompanying intellectual property indemnities are provisions requiring the software supplier to replace infringing aspects of the source code and failing this, pay the expenses of the licensee in doing so.